Our clients are medical schools/colleges. We have given a free product trial for 2 months with our first client. It is a unique product, there's a great learning process and we have had an amazing response from both students and tutors.
Now it is time to give feedback to the committee, to plan for the future and to decide product pricing.
Our approach is that we want to excite them with the pricing and give them a feel as if the product is for free. However we do need some money from them (which is 10-20% of the product cost).
Since the product will be hosted in their site, we would not be charging on a per-user basis and AMC is option they may or may not choose. So how do we project this?
Another point is that there is a rival company approaching them who do not have a very similar product, but the product they provide is free (though with no support or services), so we are wondering if that will affect our pitch?
It's valuable having an enthusiastic early adopter, so I would want to use your situation:
I like keeping things simple. So in your situation, I would work out exactly what I need to make from client #1. Whatever the figure comes out at, I would go and engage the client and look to sell in what would be a sweetheart deal for them in exchange for the benefit to you of having a lead customer who is willing to continue to partner with you as you develop the product. And that could include exploring how to price in a way that works for similar institutions.
If your client loves the product, there should be ample scope to come to an agreement that gives you both what you need.
But what if any discussion about them paying for the product hits up against your "free" competitor? Well, that's a great test of your core value proposition. You have all the aces: a running trial with enthusiastic users, a product that does what they need, a combination of technology and relationship. If your client really won't pay you a cent for that, you're going to have to have a major rethink of your business model!
As for pricing as you engage new clients, you have a blank canvas. Pricing per user (or, similarly, user block pricing) is a possibility, regardless of how your system is deployed. Or it could be a consulting sale - charging for the system, for time and materials for customisations and installation, and ongoing support and upgrades. Or... Or...
How do you decide? Well, the structure of pricing your product needs to map both onto the way your target market perceives its value, and the way their buying processes work. You should be looking at other third party software used by the clients you are already engaging with and finding out how they came to buy it in the first place and how they pay. And you should be looking for emerging trends, so you can line up with what the switched-on faculty is looking for.
Capturing what learning you already have in this area, and engaging with clients to close some of the information gaps, should be your priority. You're not in the situation of most web start-ups who can experiment with pricing structures and levels. Ideally, this would be something you would have worked on in parallel with other activities to date. If you haven't, you should expect it's going to take you some weeks to have pricing that you're comfortable optimizes the opportunity going forward.